SEC stretched thin by new rules

By Bill Swindell

October 19, 2010

Securities and Exchange Chairman Mary Schapiro said Tuesday the cost of implementing scores of rules under the Dodd-Frank overhaul of financial regulation has forced her to shift money and people from other pressing tasks.

In an address to the National Association of Corporate Directors, Schapiro said that her agency has to issue 105 rules, conduct more than 20 studies and create five new offices. Those mandates, she said, have stretched the commission's $1.1 billion budget. The Obama administration has proposed a 12 percent increase for fiscal 2011, but Congress hasn't yet approved it.

"We will be shifting resources from other areas that I think are equally deserving of our time and attention right now," Shapiro warned. Though she insisted the SEC would meet all its deadlines under the new law, she said the agency had "been stretched too thin over time" and was "really resource constrained."

Schapiro's remarks echoed complaints by Bart Chilton, a member of the Commodity Futures Trading Commission, who has said his agency hasn't been given enough money to carry out its duties under Dodd-Frank. The CFTC had requested an additional $92.2 million beyond its $168.8 million budget, and it received no boost in the recent continuing resolution that kept agencies running until the lame-duck session can consider full-year funds.

The funding issue is emerging as a key obstacle as the two agencies press ahead to issue their rules amid heavy lobbying by the financial sector. It also comes as Republicans have a shot of taking over both chambers in the next Congress and are vowing to slash domestic spending. While the two agencies are not considered likely to have their budgets reduced, they may not get as much as Obama has requested if Republicans take control.

The SEC failed in Dodd-Frank negotiations to be given self-funding powers through the fees it collects, which this year are expected to total $1.5 billion. Appropriators protested they would not be able to have sufficient oversight. But the agency was allowed under the new law to tap up to $100 million annually from a reserve fund.

Schapiro noted that her agency must start from scratch on two rules where it has not had a significant presence: oversight of over-the-counter derivatives and new registration requirements for hedge funds. Both are expected to require significant money and manpower.

"We're going to create a regulatory regime where none currently exists," Schapiro said of the hedge fund rulemaking.

On Monday, the commission proposed final rules to implement provisions in the new law that require corporations to give shareholders an advisory vote on their executive-pay plans at least once every three years. The SEC rule also would also allow a non-binding vote on golden parachute packages.